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E-MailAnna Natapova is Principal at Semler Brossy LLC, Cynthia Soledad is Coleader of the Global Diversity, Equity & Inclusion Practice, and Chuck Gray is Coleader of the US CEO and Board Practice at Egon Zehnder. This post is based on a Semler Brossy memorandum by Ms. Natapova, Ms. Soledad, Mr. Gray, and Blair Jones. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain (discussed on the Forum here) and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) both by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.
Many boards and executive leadership teams have already embraced the premise that diversity, equity, and inclusion (DE&I) initiatives when done well can yield many benefits, from improved talent attraction and retention rates to better decision-making by inviting in more diverse perspectives. What is less discussed is that the absence of well-run DE&I efforts is a business risk.
The absence or misalignment of well-executed DE&I initiatives can introduce unintended challenges, potentially derailing the achievement of objectives. For example, if your organization publicly signs on to a new DE&I initiative or takes a position on an issue, there will be reactions from stakeholders—some may be positive, but some could be negative. Companies may also face employee, customer, and public backlash to inaction or performative goal setting for goals that are never achieved.
Avoiding these types of risks and capturing the full potential of DE&I efforts make effective leadership imperative. What does effective DE&I engagement look like at the board and management level? Below, we explore three common missteps organizations make in their DE&I efforts and strategies to overcome them.
Overcoming Common Pitfalls in DE&I Efforts
Too often, the pressure to deliver quick DE&I wins can lead to a “blunt-force” approach. DE&I work done well is nuanced, is thought through, and takes time and resources to deliver sustainable change. Getting trapped in any of the common pitfalls captured below can introduce new risks and inadvertently set the DE&I agenda back.
- Pitfall: Appointing a new chief diversity and inclusion officer (CDIO) to solve myriad challenges without complete alignment on the goals, timing, and resources needed to deliver. Sixty percent of Fortune 50 companies named a new CDIO in the past three years, and 60 percent of those appointments went to external candidates. These types of appointments could easily lead to misalignment around goals and objectives. Companies are so excited to have a leader in place, they may drop all outstanding ideas on the new leader’s desk, fail to prioritize efforts, and not provide proper resources to proceed. One person alone cannot solve all the issues embedded in an organization’s culture and processes.
Better Strategy: The same level of care boards and executive teams take to align goals and resources to deliver any business objective should also be taken for DE&I objectives. The board and executive team should work with a CDIO to set achievable goals on realistic timing and allocate appropriate resources to implement systemic solutions that meaningfully change culture and representation. With complete stakeholder alignment and support, CDIOs and their DE&I agendas are set up for success. - Pitfall: Focusing on a narrow set of metrics to define the success of DE&I efforts. Seeing an uptick in underrepresented hires is an incomplete goal, yet this is where many organizations focus their attention and action. Overreliance on a single metric or narrow set of metrics creates a risk of missing some critical underlying issues that must be solved. It can also create unhelpful short term-focused behaviors in the hiring process.
Better Strategy: Examine all aspects of the employee life cycle, understanding opportunities in hiring as well as talent development and retention. What are the underlying cultural dynamics and behaviors driving the current data, and what evolution is needed in the culture to create different outcomes? - Pitfall: Setting bold goals without a data-based foundation. At times, the excitement to demonstrate a deep commitment to progress can drive some organizations to make outsized promises without doing all of the homework on how that goal could be achieved. Sometimes, these promises come in the form of fast shifts in representation without analyzing how many hires are done in a year or typical turnover, for example. Companies may also promise to commit significant resources to outside partnerships before working closely with those possible partners on how the resources would be deployed and what benefit they will provide.
Better Strategy: Base goals on solid data analysis and due diligence. This may require proper resourcing of an analytics team, collecting data in new ways, taking partnerships one step at a time, and codesigning programs that work for both parties—all actions that take precious time. But investing time up front is critical to achieving the desired outcomes. Unfulfilled promises can leave stakeholders feeling disappointed and skeptical.
While DE&I work is ripe with opportunities, boards and executive leadership teams must also consider the risks that come from an absence of real DE&I progress. Companies need the right decision-making structures within the DE&I agenda to move forward while appropriately mitigating reputational risks. As with cybersecurity, you can’t predict an attack, but you can ensure that you set up the right systems and protocols. Getting DE&I right from a risk and opportunity perspective requires a thoughtful and nuanced approach rather than a blunt-force strategy that seeks quick wins.
